Tag: chapter 7

credit card lawsuit options and shield

4 Options if a Credit Card Lawsuit Hits

4 Options if a Credit Card Lawsuit Hits

When a credit card lawsuit strikes, it’s terrifying. However, you have options. None are perfect, but let’s look at some pros and cons and how each of these might work for you, and whether you need a credit card lawsuit attorney.

How we got here

How likely is it for a credit card company to sue you?

First, it helps to stop and look at how things got to this point. It surprises many of my clients when they initially contact me. They ask, “can a credit card or collector sue for missing payments?” The answer is, “yes.” If you miss a payment or two, we all know that a credit card company or their collectors can bug you. Collection harassment is extremely common, and of course a collection harassment lawyer is valuable to protect you.

Do credit cards usually sue? It depends. However, what many people don’t realize is that a credit card or their collection company can advance from collection harassment to credit card lawsuit. They don’t do this right away, and not every one of your credit cards will take their customers to court in all cases. But as a right and business practice, yes, if you wait long enough, the odds are that one of your credit cards will give you a collections law suit.

Credit card lawsuit statute of limitations in Calif

The lawsuit won’t be too soon

How long will credit cards wait to sue you if you’ve stopped paying? Or put differently, how many months before the credit card sues you? Can they wait too long where they blow the statute of limitations where I have a real defense? The answer, like most things in law is: “It depends.”

Firstly, credit card companies don’t typically file lawsuits for one missed payment. Or even two or three. It’s possible their collection harassment might produce results. Plus, it costs creditors less money to robocall you incessantly than lawyering up.  Consequently, they wait a while if they’re going to file a complaint or summons with the local court for a collections lawsuit.

The lawsuit usually won’t be at the last minute

On the other hand, they’re not going to wait until the last minute to sue you either. They know how much time they have remaining on the statute of limitations, and as a rule, don’t wait until the final moment. They want to avoid miscalculating, and now you having the possibility of a defense.

The statute of limitations can be a successful defense to a cause of action. Each type of lawsuit has a different amount of time. Failure to maintain your payments is breaking your cardmember agreement. That is a contract between you and the credit card company.

In California, the statute of limitations for a breach of written contract claim is four years. That is, the credit card lawsuit statute of limitations in California is four years. Each state has a different law, so if you’re outside California, check with a local bankruptcy attorney near you like me.

Your options if a credit card company sues you

Now we understand how this happened. We can’t change the past. However, you can control how you respond. You can make an informed decision about how to best move forward.

Let’s start with a disclaimer. None of these options is advice for you, it’s just information, and none of them will be ideal. Each has a downside, and it doesn’t take a trained eye to find the negative in any given situation. The challenge is to identify the positive, and then weigh the good and the bad against your current priorities, future goals, and resources. This is one benefit of setting up a chat with an impartial professional who can analyze things objectively. But before you contact me, read on.

1. You can ignore the credit card lawsuit

Yes, that’s right: you can respond by not responding, and do nothing. Doing nothing is an option. No one is saying that ignoring a legal summons or complaint is a good option. In fact, it’s horrible to ignore legal deadlines and impair your legal rights. However, when brainstorming, everything goes on the table.

If you ignore the collections lawsuit, it will eventually and almost certainly turn into a judgment. A credit card judgment is a terrible, awful, very bad thing. With that, they can collect on the judgment and take your assets.

Pros:  It’s free and costs nothing… yet; avoids bankruptcy; stress of wondering when they get the judgment and your life will change for the worse.

Cons: Judgment can garnish wages (usually 25% of your net pay in California), empty and levy bank accounts, and put a lien on your home, Also, the judgment grows at 10% annually with post-judgment interest until the balance is paid.

Ignoring a credit card lawsuit is generally a bad option.

2. You can defend the credit card lawsuit in court

Second, you can find a credit card lawsuit attorney and defend the collection lawsuit and respond to it. This involves preparing a legal response which explains valid grounds why you didn’t breach the contract. Note: it’s generally not a valid defense to explain that you don’t have the ability to repay. To win on this, you’ll need to prove that no, you did not break the contract.

Unless the credit card company sued the wrong person or you’re actually current with your minimum payments or they blew the credit card statute of limitations in your state, chances are there is no valid legal defense.  That means that even if you go through the steps of replying to the lawsuit, that there will likely still be a judgment against you.

Pros: delay the inevitable; avoid bankruptcy… temporarily; chance you could win if you really didn’t break the contract or they waited too long to sue you

Cons: your lost time, money, and emotional strain of fighting ruthless collection lawyers in court for months or years

A small warning of caution of defending a collection lawsuit

How to defend a credit card lawsuit: There are numerous websites selling the notion “how to beat a credit card lawsuit” and how to win and defend a credit card law suit with these 5 common defenses and this one weird trick (and you won’t believe number 4!). Many of these are suggesting stalling tactics or technicalities to clog up the court system with defenses and discovery requests (which will take you a lot of time and energy with which to comply).

I say the following as someone who provides relief to desperate souls for twenty years. I write also as an attorney who successfully won a case against a large credit card company where a judge ordered them to pay tens of thousands of dollars. Beware of those selling false hope. Yes, you may be able to seek documents, or debt authentication by requesting evidence of chain of custody or lots of other things in discovery. And this may successfully slow down the inevitable end (and result) of the lawsuit. But it may also be frowned on by the judge as bogus or bad-faith defenses or discovery.

If they can afford a Jedi Knight, they will spend to collect their debt

However, do you believe that the same credit card companies who pay major movie and TV stars to advertise for them will turn around and hire Barney Fife as lawyers who are so sloppy that it makes the debts noncollectable? Even if one person were to successfully defend a credit card lawsuit in court due to negligent oversight, it’s reasonable to expect the massive conglomerate would immediately shut down that loophole so no one else ever did again.1

Again, I dedicate my life to help people who are overwhelmed by credit card debt. As a consumer debt attorney, I provide hope and relief to those who most need it. But that compassion must be tempered with truth and reality when appropriate.

The most likely result of fighting to win and defend a credit card lawsuit will be long, drawn-out discovery. This lawsuit discovery will require hours of your time. It will be a major emotional drain, cause bitter resentment, and a hard-fought battle when the multi-billion-dollar credit card company wins and its lawyers obtain a judgment in court for the debt.

The “win” of slowing things down will come at the cost of your inner-peace, angry obsession with the evil credit card company, and its bitter disappointment corroding a small piece of our soul.

However, in some cases, there can be strategic benefit to defending the credit card lawsuit. This, like most decisions in law, should only be done with clear-eyed realistic expectations.

3. You or a credit card lawsuit attorney can settle with the credit card company

Third, you have the option of settling the lawsuit. All they want is money. If you’re extremely fortunate, the credit card attorneys will agree to a series of payments. However, don’t expect a significant discount to settle the debt for pennies on the dollar. That ship sailed long before lawyers go involved, and they expect to get reimbursed for costs and fees.

Further, if they’ve spent the money to take you to court, they usually feel the ‘win’ or judgment is assured. There is little reason to give you a discount or accept $25 a month. As a rule of thumb, credit card companies will negotiate a settlement on a lawsuit with a lump sum payment.

Pros: You can negotiate a discount and save money on your balance; avoid bankruptcy; have the whole process over; get peace of mind.

Cons: Typically requires lump sum payment which you don’t have; stress of negotiating with attorneys; time involved of back-and-forth offers and counter-offers.

“How much can I settle a credit card debt for?” The answer is (as always), “it depends.” Yes, with credit card debt settlement you can really settle a debt for less. However, the opportunity for the biggest negotiated discounts are gone now that the collection has incurred legal costs. At the collection lawsuit stage, you’re not going to settle for 10% of the debt you owe, though it would be a major win if you can negotiate the credit card debt for 50%. You should have at least that amount in cash ready to pay immediately in case you settle your debt for less, as they’ll want a lumpsum payment.

While you don’t need a debt settlement attorney to negotiate a debt resolution, it helps to have a professional who is outside the situation involved. First, it saves you a lot of emotional wear and tear. Second, this is what we do. Third, if a bankruptcy attorney like me makes an offer to settle a credit card debt, there’s an implicit threat that if they don’t accept, you file can bankruptcy and they get nothing. That kind of leverage can help a credit card lawsuit attorney negotiate a good result.

4. Filing bankruptcy ends a credit card lawsuit

Finally, bankruptcy should be the last resort, and usually is. You can file bankruptcy, and that will end the collection lawsuit.  The benefit of the automatic stay — typically known as “bankruptcy protection” — means that creditors cannot start or continue any collection activity once they know you’ve filed bankruptcy. It’s an extremely powerful shield with the force of the federal government; creditors can be sanctioned thousands of dollars for willfully ignoring it.

Now, you should not just run into the safety of bankruptcy without first surveying the landscape. As each case is different, this is really where the major advantage of talking to a skilled bankruptcy attorney comes in. We can advise about any specific risks or benefits to your particular situation. So the following list of pros and cons will be very generalized until we learn your unique facts.

Pros: peace of mind; stops the credit card lawsuit; protects assets, paycheck, home, and bank accounts from collections; possibility of debt consolidation repayment, which could also be a con.

Cons: on your credit report for a number of years (but you can rebuild credit after bankruptcy); some cases involve liquidation of assets; payment to a bankruptcy lawyer, (which is almost always cheaper than paying all your debt).

Closing words

When faced with a credit card lawsuit, you have options. What you should do when you are sued for credit card debt depends on your unique circumstance, your priorities and goals, and your resources.

I’ve successfully settled collection lawsuits, which can be done if my client has the ability to offer a lump sum settlement. Payments on a debt settlement are possible, but less likely.

Doing nothing is the simplest: it literally requires no action on your part. But, it can lead to disastrous results.

If you’re in Los Angeles County, Orange County, Ventura or Santa Barbara Counties, reach out to me. I’ll provide a free Zoom consultation to those residents for 30 minutes to go over your options, provide the best advice I can, and explain if bankruptcy may help.  I vow you’ll get experienced honest advice about what I believe is your best step forward.

Contact me now


    Footnote

    1It remain the opinion of this consumer debt attorney that large credit companies refuse to spend the money to put in processes to protect codebtors in Chapter 13 bankruptcy. Not enough debtor counsel prosecute violations of the codebtor stay, so credit card companies refuse to take measures to protect themselves and their shareholders. This is quite different from the very common process of ensuring they can prove you owe your debt, as it’s their bread-and-butter to come after you for their high-interest money and how they can afford superstars like Samuel L. Jackson and Jennifer Garner.

    2021 median income limits

    2022 Median Income Limits to Nail Bankruptcy Means Test in Calif

    Median Income Limits to Nail the Bankruptcy Means Test | New for 2022

    The government updated the numbers for 2022 median income limits. Using median household income, it again got easier to qualify for bankruptcy Chapter 7, because of another means test adjustment.

    The means test for bankruptcy decides who qualifies for Chapter 7 bankruptcy eligibility. The first step of this process is comparing your median household income against the California median income limits set by the Department Of Justice guidelines to see if you earn less than bankruptcy median income limits.

    Update for 2022:  The Department of Justice announced in November that it “will not post updated median income totals until a Consumer Price Index adjustment in spring 2022.” Normally it moves the bar that we’re trying to get under twice a year. For the first time in recent memory, there is no Autumn update. This could be good news or bad news, depending on your individual situation.

    Because of the above statement, these will be the first 2022 median income limits.

    The means test limits adjusts over time.  So, someone may not qualify according to the bankruptcy means test in one month but after the changes they do, or vice-verse. The last updates were in May 2021, and are likely changing again in 2022 . Here are the early 2022 bankruptcy median income figures to determine who can file Chapter 7 bankruptcy.

    Means Test: 2022 Median Income Adjustments

    2021 median income limits
    2022 median income numbers are much higher than in years past

    Every now and then, the government updates the bankruptcy median income limits. They last did it in May 2021. Good news: the California 2022 median income numbers are now even higher, increasing household income for bankruptcy means test qualifying. This means that more people could qualify for Chapter 7 bankruptcy using the California median income numbers below.

    2022 Median Income for California Households

    Because the California median income changes maybe once or twice a year, these recent changes late last year will be the first numbers used for 2022 median income. You’ll see below there’s talk about household size. Notice also that larger families also get a break, as the amount for each additional member after 4 increases another $9,000. This is helpful for households of five people or more.

    What is Median Household Income

    When reviewing median household income, we start splitting hairs, since not every home is a traditional household. So, things start getting kind of cloudy on what is or isn’t a household. It isn’t always clear who counts in a household. There may be a difference if you have a roommate who pays rent. What if you’re married? Or have kids but they’re adults. Do you live with your significant other, who has their own finances? Would the answer be different if you had kids together, but weren’t married? Maybe they’d all be considered by the government to be in your household. Or, maybe they’re not. Call and let’s meet to talk about it.

    But below are the California median income limits for the various household sizes.

    California household size and California median income for Bankruptcy
    • 1-person household: $62,171
    • 2-person household: $82,418
    • 3-person household: $91,605
    • 4-person household: $105,232
    • Each additional person: $9,000

    These are the California median income numbers as of early 2022. If it’s later in the year or you’re looking for the median household income for a different state, please review the DOJ link above.

    Read Our Means Test Guide.

     

     

    Can you file bankruptcy if your household income is over the median?

    If you’re over the bankruptcy median, there’s still hope

    Yes. The means test and 2022 median income isn’t the “end all be all.” It’s just a starting point. A person can still file Chapter 7 bankruptcy, in some cases, even if they earn more than the median income. The bankruptcy means test would just need to be filled out completely. It’s still possible to qualify.

    Over the years, this Los Angeles bankruptcy attorney has helped people who earn over the California median income limits still qualify for Chapter 7. In one case, we even helped a family whose annual income was almost double the median household income. They were earning around $150,000 a year, and we helped them get a Chapter 7 discharge (your mileage may vary). However, even if someone isn’t eligible, there is still a way out of debt in Chapter 13.

    Being Under the Bankruptcy Median Income Doesn’t Guarantee Success

    On the other hand, just because someone is earning less than the California median income, it’s possible that they’re not eligible for Chapter 7 bankruptcy.  Bankruptcy is all about whether someone can afford to repay their debt or not, and the means test is just one factor.

    Note: the median income numbers are not to be confused with the Los Angeles County median home price figures, and each has a different place in evaluating Chapter 7.

    Finally, as the economy is always changing, so does California median household income. We don’t know the next time changes to the median income limits will happen again. So, be sure to check before relying on these California median income limits in the future.

    Contact Us and Let’s Find out If you Qualify


      median home price los angeles

      Los Angeles County Median Home Price (2022)

      Los Angeles County Median Home Price (2022)

      The Los Angeles County median home price in 2022 can be tricky to determine. There are different sources that say different things. It’s not clear which of the many options will be relied upon by courts and trustees for the California homestead exemption.

      Warning: This is provided as information only, and is not legal advice. If you are thinking of filing bankruptcy, do not rely upon any information on this webpage. You are assuming all risk and are literally gambling with your home. You will have only yourself to blame if you use the wrong numbers for the Los Angeles County median home value.

      See a bankruptcy attorney for more updated information before you file.

      Average is not Median

      los angeles county median home value
      The Los Angeles County median home value is not the mean

      Before we can determine what the Los Angeles County median home price is, we’ll need to know what it’s not. A median is not the same as the average. This takes us back to high school math, but a quick couple of definitions:

      • Average (or mean): this is where you add up the data, and then divide by the number of data points
      • Median: this is where you list all the data, and then take the number which is at the midpoint

      So, as you can see, the median is not the same as the L.A. County average home value.

      The Median Changes Over Time

      Because the median is the midpoint of all the data, each time there’s another home sale, the median changes and moves. You may figure with a random distribution of data, there would be an equal likelihood that future sales will be about half above and half below the median, keeping the median the same. But home prices change over time and are not static, and particularly during a virus pandemic like the COVID-19 coronavirus we had in 2020 and 2021.

      For example, you might find some data sources that list the median home prices for last year, but only through December.   Can you assume that houses would sell for the same prices in December around the holidays as they do during the summer when people move a lot and kids are usually out of school?

      Read Our Means Test Guide on Median Income Limits.

       

       

      The Los Angeles County median home price is not the same as that for the L.A. area

      Los Angeles County is one of the largest counties in the United States, with over 4,000 square miles. While you may find data for the metropolitan area, that’s very different than the numbers for Los Angeles County. Why? Because L.A County goes from South Bay all the way up to the Antelope Valley and Lancaster. The Los Angeles County median home price is pulling together data from all these.

      Los Angeles County is home to about 10,000,000 people, while the city of L.A. has “only” 4,000,000. If you use only city data, you’re missing out on home values in remote areas in LA County like Littlerock and Pearblossom on the 138 and on the way to Vegas.

      The Median Home Value is not the same as Median Home Sales Price

      You can find some sites which average the values of the homes in the L.A. area, or even Los Angeles County. The problem with that is this: you’re using their own estimate about the Los Angeles county median home values, even those that didn’t sell, when what you’re really needing is the sales price of homes that actually sold.

      After reviewing all the above, you can see that we’re looking for a very specific thing here, and no one website reports the Los Angeles County median home price, or has information that in 2022 is depended upon reliably as the “go to” source for Los Angeles County median home value information. Over time, maybe one place will emerge, but for now there’s just a few “almost there” entries.

      Some Data Sources Which are Close

      which data source can provide the los angeles county median home price
      Which of the various data sources is the right one?

      With all that being said, you can understand the challenge of finding the Los Angeles County median home price.  Most websites are using averages, some have only the L.A. area, and none of them let you have access to the data of all the home sales so you can calculate the median yourself.

       

      Zillow: this company is famous for using its proprietary “Zestimate” to approximate home values. For example, if you go here, you can find what Zillow calls “the typical home value of homes in Los Angeles.”

      But that number isn’t clear…. What does “typical” mean – average or median? Remember, they’re different.  Home value or home price? There’s no indication this is relying on sales data. And for what time period? Now, at this snapshot in time, last month, this year, or last year?

      The website doesn’t say what the Los Angeles County median home price is. It also doesn’t say if it includes single-family homes, is only single-family homes, or something else.

      Realtor: This website features real estate, but if you dig down deep enough, you can find market data, research, and trends. It provides data by month, not year, and appears to be providing listing prices, not sales prices.

      Redfin: Redfin is another national real estate website, which tracks listings and sales, and helps connect home buyers to realtors. It has market data and trends, but seems to be restricted to only Los Angeles city, not all of Los Angeles county median home price info.

      CAR: The California Association of Realtors also has some market data. But it cautions that the data which it is using comes from over 90 associations and counts “single family detached homes only” and “median price changes may exhibit unusual fluctuation.”

      Trulia: Similarly, Trulia is a real estate website that tracks home sales and house prices. It has a way to filter for L.A. and show market information at the bottom of the page, but doesn’t show Los Angeles county median home price or value info.  It appears to list home values the way Zillow does, but it doesn’t appear to be relying on sales data.

      News reports: You may find news reports from Los Angeles-based newspapers that report data on home sales prices.

      Note: you may find some websites that provide spreadsheets of Los Angeles County median home price data, and lists medians by month. Taking the median of the medians isn’t the same as the median of all the sales data. It’s just creating garbage data. To find the true Los Angeles County median, you’d have to have access to all the sales data. This is something very few people have.

      And that’s the problem:  no one person has the data, and different places which are close report different numbers for the Los Angeles county median home value.

      While some of these are close, none of these seem to provide “the” number. Not one can be relied upon, especially for something which involves risking your home.

      Summing up Los Angeles County median home price

      Is there one bottom line source? No, and honestly, a lot of us are trying to sift through all this information to make sense of it. Maybe in the months ahead, one choice will crystalize as the one we all rely upon.

      This will likely be after litigation and people guess wrong. Sadly, they will lose their homes in some cases because they guessed wrong on home value.  Currently, there is not one number that we can reliably “bet the house” is the median home price in Los Angeles County.

      Be very cautious, use this at your own risk, and best of luck to you in your future.

      Contact us

      If you’re in Los Angeles County, request a case evaluation, which we can set up by Zoom.


        california median income

        California Median Income Hits New High

        California Median Income Reaches Historic Milestones

        The California median income is a good guide to how well residents in the Golden State are doing financially. The California economy (until this week’s Coronavirus outbreak) was sitting pretty, and its citizens are earning income. The numbers used to qualify for a “straight bankruptcy” have broken some very notable milestones.

        Recent California Median Income

        Starting on April 1, 2020, median income for a household of one in Calif has broken the $60,000 threshold. The median income for a household of one in the Golden State is now $60,360.

        Even more amazing, a family of four has a California median income of $101,315. This is the first time in recent memory, if ever, that a median household of four in Calif has earned six figures.

        The significance of these numbers — $60,000 and $100,000 — applies to bankruptcy. The Department of Justice uses numbers from the Census as a preliminary measuring stick. They’re used to assess whether a debtor or debtors qualify for Chapter 7 bankruptcy. Not everyone is eligible, with the alternative being debt repayment with high income.  In theory, people earning $60,000 and $100,000 would ave a relatively easy time doing a bankruptcy and not repaying their debt.

        See our median income article for a more thorough explanation. Also, you’ll find updated numbers, and the median income amounts used for other household sizes. The values change frequently, and by the time you read this page may have gone down due to COVID-19’s impact on the economy, so check that link for the latest amounts.

        Woman Facing Jail

        Disclose, Disclose, Disclose: Woman Facing Jail for Bankruptcy Fraud

        When you file bankruptcy, you’re signing a stack of papers under oath. You’ll then be asked, under penalty of perjury, whether they list all your assets, income, and about any recent transfers. The wrong answer, a lie, could land you in jail for bankruptcy fraud.

        A woman in Michigan recently pled guilty to bankruptcy fraud. Wait, jail? Bankruptcy is just forms, right? Just before filing bankruptcy, she had received a $12,000 workers’ compensation award. She, then made it disappear. After that, she lied about the whole thing. Now she faces five years in prison, $250,000 fine, or both.

        The sad kicker is this: in California, this likely could’ve been avoided. All she has to do was everything disclosed everything. With a good bankruptcy attorney, it could then properly exempted. She’d be free today, enjoying her discharge and money.

        She only had to tell the truth to her bankruptcy lawyer. Then, she needed to be honest in the bankruptcy papers. a good Los Angeles bankruptcy attorney could have exempted the award, and she’d have it to spend when the bankruptcy is over.

        By trying to save a few bucks on maybe the best bankruptcy lawyer, she’ll not only lose $12,000, but maybe twenty times that, and her freedom.

        Contact me today for a consultation, and let’s guide you to a honest fresh start.

         

        credit after bankruptcy

        Study from LendingTree Says Credit After Bankruptcy Discharge Doable

        Study from LendingTree Says Credit After Bankruptcy Discharge Doable

        A bankruptcy study recently debunked a myth. You know the one, that bankruptcy will ruin your credit forever. Last week, LendingTree, the largest online lender, released study results about credit after bankruptcy discharge. It followed people after their case was completed. This is consistent with my article asserting that there is indeed credit after bankruptcy discharge.

        READ MORE: Credit after bankruptcy

        credit after bankruptcy
        Yes, Virginia, there is credit after bankruptcy.

        The researchers learned that a credit score of 640 or more was achievable after bankruptcy:

        • one year after bankruptcy for 43 percent of borrowers
        • two years after bankruptcy for 65 percent of borrowers

        In fact, the researchers concluded:

         

        People recovering from a bankruptcy are in a similar position to anyone who needs to repair their credit standings. The study finds no indication that people in the aftermath of a bankruptcy will have a harder time accessing credit than their peers who did not file for bankruptcy (except for potential mortgage loan embargos caused by the Fannie Mae policy discussed above).  Some people may even find themselves in a much better position to recover, thanks to a reset of their debt-to-income ratios.

        See also LendingTree’s pointers for how to rebuild credit after bankruptcy discharge. This validates everything we’ve been teaching people, and shows that even if you feel trapped by bad credit, a bankruptcy can provide the fresh start you need.

         

        bankruptcy debt limits

        Is There a Debt Limit to Chapter 7

        Is there a debt limit to Chapter 7?

        One question people ask is, “How much do you have to be in debt to file Chapter 7.” Unlike Chapter 13 bankruptcy, there is no debt limit to Chapter 7. It just becomes a matter of practicality. There are financial benefits to file Chapter 7 bankruptcy, but these must be weighed against the costs, monetary and otherwise..

        Too little debt for Chapter 7

        The Bankruptcy Code has no lower limit to file bankruptcy under Chapter 7. The only limit is common sense. One the one hand, if you owed someone a dollar, and the Chapter 7 filing fee is $335, most people would just pay the dollar. No brainer. Another example: if you owed someone $1000, the debt is greater than the filing fee, but now there are other costs you’d weigh, like the hit on your credit. Is it worth it to discharge $1,000 of debt but have a bankruptcy on your credit report? Most would say no. Each individual weighs their own personal limit line differently. Many people would agree that $20,000 or $30,000 of debt is a lot to ditch in a bankruptcy discharge. A debt amount that high may outweigh the cost of the bankruptcy filing fee, paying a bankruptcy attorney, and the credit report ding. While there’s no debt limit to Chapter 7, we bankruptcy lawyers do see a typical range of debt.

        Too much debt for Chapter 7?

        On the other hand, there’s nothing written in the law that has a specific dollar amount that becomes too much debt to file a Chapter 7 bankruptcy (note: this is in contrast to Chapter 13 bankruptcy, which has a maximum debt limit set by law in 11 USC 109(e), which periodically adjusts, so check current chapter 13 debt limits).

        There are other factors though that can stop a bankruptcy with too much debt. Firstly, the government looks at whether the debt was obtained in good faith. If someone unemployed for years has $250,000 of credit card debt, were they really intending to pay it back? Secondly, they look at the nature of the debts: were they luxuries like travel? Another factor is if the debts or discharge was obtained by fraud. Too much debt is situation specific. It may make sense for a business owner to have a lot of debt, but maybe not so much for a retired grandma.

        Summing up the Debt Limit for Chapter 7

        In short, there is no debt limit to file Chapter 7. Common sense factors would make it not worthwhile to file Chapter 7 bankruptcy for some. There is an upper limit that will get you on the trustee’s radar, though it’s not sure exactly what that number is. Like most things, if it’s reasonable it should work, though your mileage may vary.